Oil prices crashed mid-week on news that U.S. crude oil inventories spiked, offering evidence that the oil market is not as tight as expected only a few days ago.
U.S. inventories jumped by 10 million barrels last week, rising to 470.6 million barrels. That is about 34 million barrels higher than at this point last year, and stocks are up about 20 million barrels in the last month alone. Rising inventories, especially consecutive increases of this magnitude, cut against the narrative that the oil market is suffering from a supply deficit.
WTI crashed on the news, falling more than $2 per barrel in midday trading on Thursday. Adding to crude’s woes was news that Russia continues to produce in excess of its agreed upon cut as part of the OPEC+ deal. “When the U.S. crude-oil warehouses bulge to their highest levels since September 2017, while production continues to set new high-water marks, warning signals should be flashing red,” said Stephen Innes, head of trading at SPI Asset Management, according to Bloomberg.
The oil market was roughly balanced in April, after having fallen into a supply deficit on the order of about 480,000 bpd, according to Standard Chartered. While geopolitical flashpoints dominate the headlines and spread fear of supply risk, OPEC+ may not have a ton of room to increase production without creating another supply surplus, Standard Chartered said. The only…